ECB buying bonds, increasing liquidity to banks

ECB buying bonds, increasing liquidity to banks
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The European Central Bank has left its key interest rate unchanged at 1.5 percent in the face of an economic slowdown and debt market turmoil.

In his comments after the ECB’s policy meeting bank President Jean-Claude Trichet left the door open to stimulating the euro zone economy further by buying back more government bonds but he would not say whether the bank is currently propping up Spanish and Italian bonds.

On the economic situation generally Trichet was downbeat: “As expected recent economic data indicate deceleration in the pace of economic growth in the past few months following a strong growth rate in the first quarter. Continued moderate expansion is expected in the period ahead however uncertainty is particularly high”

In response to the worsening euro zone debt crisis Trichet said they would keep lending money to the region’s banks with plenty of liquidity.

Economists expect the ECB to ‘pause’ on its interest rate raising cycle for several months but Trichet would not be drawn on that.

The bank put rates last month because of rising inflation in the euro zone.

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